OneConnect Financial Technology (OneConnect), an associate company of China’s insurance Ping An Group, is partnering with UBX Philippines, a wholly-owned fintech subsidiary of Union Bank of the Philippines (UnionBank), to build a blockchain-enabled platform which addresses the banking needs of micro, small and medium enterprises (MSMEs). The partnership underpins both UBX and OneConnect’s commitment to accelerate digital transformation across the Philippine financial services industry – using their respective technology bases to enable financial institutions to serve unbanked, or underbanked, communities.
“We believe there is huge economic potential in the MSME sector and we have confidence in how our technology can help enterprising businesses leapfrog into better ways of doing business. We are excited to be partnering with UBX in the Philippines, because we share the same vision of how technology can empower communities that traditionally cannot be reached. With OneConnect’s proven technology solutions and UnionBank’s deep market knowledge and domain expertise in catering to MSMEs, we look forward to introducing impactful financial solutions for MSMEs in the Philippines,” said Ms Tan Bin Ru, CEO (Southeast Asia) of OneConnect Financial Technology.
The opportunity
MSMEs play a vital role in the Philippine economy. According to the Philippine Statistics Authority (PSA):
- 99.6% of all business in the Philippines are MSMEs
- these MSMEs contribute to almost 63% of total employment
- yet SMEs receive only 9.2% of loans and financing from the country’s major banks.
Part of the significance is that many MSMEs are suppliers and service providers to large enterprises. These create jobs for the country’s growing labor force. They also stimulate economic development in rural and remote areas as well as act breeding grounds for entrepreneurs and innovative businesses.
A vibrant MSME sector is, therefore, an indication of a thriving and growing economy. However, even with policies which seek to encourage MSME development, the sector faces various constraints which prevent MSME businesses from realising their full growth potential.
The OneConnect platform
The financing platform is an end-to-end platform which leverages OneConnect’s facial recognition technology, micro-expression interviewing technology and big data-enabled artificial intelligence. It addresses a wide range of business finance needs, including:
- multi-channel loan applications
- credit assessment
- loan disbursement
- anti-fraud checking
- reduced approval times
- more accurate risk assessment.
With digital loan application channels enabled, the platform enables lenders to target a wider MSME population in the Philippines. These MSMEs will be able to use the platform’s advanced capabilities
OneConnect intends the blockchain-enabled digital platform to be operational by end-2019. Increasing availability will extend to an ever-wider community of MSMEs through 2020.
The supply chain dimension
There is also a supply chain finance dimension. Using OneConnect’s Blockchain-as-a-Service (BaaS), technology enables greater penetration across and into the supply chain. Encrypted data, including order and logistics information, means critical functions like paperless contracts, contract judgement, compliance verification and financing risk assessment become possible.
On this supply chain platform, e-payment undertakings (EPUs) are, on the blockchain:
- transferable
- divisible
- discountable
- tamper-proof
- traceable.
In effect, the supply chain platform enables financial inclusion for MSMEs. Too often an MSME existed as a second, third or even deeper tiers in a supply chain. Now the complete supplier base will be able to access cost-efficient funding, which previously was unavailable to MSMEs.
John Januszczak, President & CEO of UBX said: “As the fintech arm of the nation’s leading innovative bank, we are continually seeking new ways to better serve our customers in disruptive ways that also solve real problems. In the Philippines, 77% of our population is unbanked and we have a diverse geography that spans across over 7,000 islands.
“Digital financial solutions – such as the ones we are co-creating with OneConnect – will allow us to include more MSMEs in the financial system. We seek to transform the lives of Filipinos, and accelerate their growth by connecting them to a whole new world of opportunities.”
Enterprise Times: what does this mean
Whether in developed or developing economies MSMEs represent a crucial multiplier, in both financial and employment terms. Yet, as Mr Januszczak and Ms Tan Bin Ru observe, MSMEs have poor access to financing, and especially trade finance. The OneConnect solutions hope to reduce this struggle to access adequate financing by introducing digital innovation. If it works this will add Philippine MSMEs to modern financial and digital ecosystems.
The initiative with UBX is a logical extension of OneConnect’s initial objective to build a supply chain finance ecosystem. It is also a logical extension of Ping An Group activity (Ping An Group is China’s second-largest financial institution and fifth-largest globally by market cap.).
